The Effectiveness of risk management strategies in mitigating financial risks in Zimbabwe banking

Author

Nechitoro, Munashe

Title

The Effectiveness of risk management strategies in mitigating financial risks in Zimbabwe banking

Abstract

The purpose of this study was to explore the effectiveness of different risk management strategies in mitigating financial risk in Zimbabwe banking. This study used a sequential exploratory mixed-method research design and used both quantitative and qualitative data to provide a comprehensive evaluation of the subject matter. In this study 100 questionnaires were distributed to professionals across Zimbabwe’s banking and financial regulatory sectors. Out of 100, 80 of these were completed resulting in an overall response rate of 80%. The responses included contributions from 24 risk managers, 16 compliance officers and auditors, 16 senior executives, 12 regulatory officials and 12 academics or financial consultants providing balanced and multidimensional data for the subsequent analysis. The data collected indicates that Zimbabwean banks face a broad spectrum of financial risks, with the most prevalent being credit risk, liquidity risk, market risk (including foreign exchange risk), operational risk, and inflation-related macroeconomic risk. To address the identified risks, banks in Zimbabwe have adopted a range of risk management strategies, combining both conventional and context-specific approaches. The study revealed that risk-based lending policies were the most widely implemented strategy for mitigating credit risk. According to 81% of risk managers and compliance officers surveyed, banks now use credit scoring models, borrower risk profiling, and collateral-based lending systems. However, these strategies were more effective in urban regions than in rural banking setups due to disparities in financial record availability and asset ownership

Date

June 2025

Publisher

BUSE

Keywords

Risk management

Zimbabwe banking

Financial risk

Supervisor

Mr. Chituma